How expensive is a fridge!

We're obviously preparing some pretty detailed budgets for the cafes, and especially this week the fit outs. If it's going to cost too much to fitout the spaces we've chosen, then there's no point progressing the leasing conversations with the real estate agents.

As with many new businesses establishments, it's scary how much things cost. And the food business is no different. Items such as display fridges, coffee machines and so on cost significant amounts of money. We'll easily drop $30,000 on the basic equipment plus some tables and chairs for the smaller of the two cafes, let alone the larger one.

You only have to look through the Trading Post, or one of the online second dealers to see that even pre-used equipment is expensive.

Which of course has a huge impact on cash flow - we have to find these enormous slabs of cash before we even open the door. We might be able to stick some of it on the credit card, and thus delay the pain for a couple of months (always have your 55 day interest free credit card in your wallet in this game), but watching a good proportion of your free cash walk out the door before you've served one customer has to hurt.

We've leased equipment lots of times before in our previous businesses - particularly computers, web servers and so on. It's a pretty established concept in the IT industry. But I was curious to see what's available in the food end of town.

Hey presto, I find Silver Chef Hospitality Equipment Funding. Very similar to the FlexiRent financial company we've used for office equipment, but these guys deal in the hospitality sector. They'll even finance a full kitchen fitout. Their pitch is good - they'll finance the equipment for 12 months, after which you can buy it (at reduced rate), return it, or finance again.

I'm liking this concept. I reckon we should budget to lease the equipment for 12 months, then make a capital expenditure allowance to buy after 12 months. Like all leasing, it'll get expensive in the longer term - hence get it off the expense sheet and onto the balance sheet once free cash allows.